Egyptian President Abdel Fattah el-Sisi recently visited Saudi Arabia amid increasing financial pressure on his government. The two leaders discussed bilateral relations and regional issues, including the ongoing conflict in Yemen and the recent normalization of ties between Israel and some Arab states. However, the main focus of the visit was likely economic, as Egypt seeks financial aid and investments from Saudi Arabia to alleviate its worsening economic crisis.
Egypt’s economic challenges
Egypt has been facing significant economic challenges since the 2011 revolution that toppled longtime dictator Hosni Mubarak. The country’s economy suffered a severe blow due to political instability, and subsequent government policies have failed to address the structural issues plaguing the economy.
In recent years, Egypt’s economy has been hit hard by the COVID-19 pandemic, which has further exacerbated the country’s economic woes. The tourism sector, which is a significant source of foreign currency, has been particularly hard hit by the pandemic, with tourist arrivals declining sharply.
Egypt’s foreign reserves have been dwindling, and the government has been struggling to finance its budget deficit, which has widened due to the pandemic. The country has turned to the International Monetary Fund (IMF) for financial assistance, securing a $5.2 billion loan in 2020. However, the IMF loan comes with conditions, including the implementation of painful economic reforms, such as subsidy cuts and tax hikes, which are likely to cause widespread social unrest.
Saudi Arabia’s role
Saudi Arabia has historically been a significant supporter of Egypt, providing the country with financial aid and investments. In 2018, Saudi Arabia pledged $20 billion in aid and investments to Egypt, including $500 million for the Sinai Peninsula development project.
During el-Sisi’s recent visit, the two leaders discussed the possibility of Saudi Arabia providing additional financial aid and investments to Egypt. Saudi Arabia is also reportedly considering buying a stake in the state-owned National Bank of Egypt as part of its efforts to support Egypt’s economy.
The significance of the visit
El-Sisi’s visit to Saudi Arabia comes at a critical time for Egypt, as the country seeks financial aid and investments to address its economic challenges. The visit is also significant in the context of the wider geopolitical landscape in the Middle East.
Egypt and Saudi Arabia have traditionally been close allies, with the two countries sharing a common interest in countering Iran’s regional influence. The visit is likely to strengthen the strategic partnership between the two countries, with both leaders reaffirming their commitment to regional security and stability.
The visit also comes amid a changing regional landscape, with the recent normalization of ties between Israel and some Arab states. Egypt played a key role in brokering the normalization agreements, and el-Sisi’s visit to Saudi Arabia may be seen as an attempt to strengthen Arab unity in the face of regional challenges.
Challenges ahead
Despite the promises of financial aid and investments from Saudi Arabia, Egypt’s economic challenges are likely to persist in the short to medium term. The IMF loan and the painful economic reforms it requires are likely to cause social unrest, which could further destabilize the country.
The COVID-19 pandemic is also likely to continue to impact Egypt’s economy, particularly the tourism sector, which is unlikely to recover fully until the pandemic is brought under control globally.
Conclusion
Egypt’s economic challenges have been compounded by the COVID-19 pandemic, and the government has been struggling to finance its budget deficit. El-Sisi’s visit to Saudi Arabia is significant in the context of Egypt’s efforts to secure financial aid and investments to address its economic challenges. The visit also highlights the strategic partnership between the two countries and the importance of regional stability and security.